Earlier last year, the high court approved the first court contract of public interest (CJIP) signed October 30 between the National Financial Prosecutor (PNF) and HSBC Private Bank, the Swiss subsidiary of the UK bank. Signed with the French National Financial Office, HSBC Private Bank agreed to pay 300 million euros, recognising that their actions revealed existence of money laundering tax fraud. Would such an occurrence happen under the UK or US authorities? Here, Christian Urrutigoity, Paralegal, Byrne and Partners LLP, compares the three systems, and if the French ‘uncooperative nature’ hinders such investigations.
On the 14 November 2017, the Cour D’Appel de Paris approved a Convention Judiciaire d’Intérêt Public (“CJIP”) between the French National Financial Prosecutor, Parquet National Financier (“PNF”) and HSBC Private Bank (Suisse). This agreement is the first CJIP entered into by the French authorities since the “Law regarding transparency, the fight against corruption and the modernization of economic life” (better known as the “Loi Sapin II”) was passed in December 2016.
The investigation revealed that between 2006 and 2007, HSBC had offered certain banking services while it had access to information enabling it to know, or suspect that certain clients used those services in order to conceal their assets from the French tax authorities. As part of the CJIP, HSBC undertook to pay €300 million in order to avoid a conviction. The settlement was made up of €158 million public interest fine, which represents the maximum allowable fine of 30% of the Bank’s average annual turnover over the previous three years, and €142 million for the French State. The €158 million fine is divided between €86.4 million of disgorgement of illegal profits and a €71.6 million additional penalty.
Franco-Anglo-American Comparison: How Important is Cooperation?
At first glance, all three systems appear to be similar. The CJIP, much like the US and UK DPAs, allows a company to negotiate a settlement with prosecutors and avoid a criminal conviction by demonstrating good conduct, whilst individual representatives of that company can still be prosecuted and face separate sanctions. Although, somewhat surprisingly, the French CJIP model appears to resemble more closely the newer and still largely untested UK regime rather than the well-established US model, by requiring the approval/intervention of the courts before an agreement can be entered into.
In the UK, Lord Justice Leveson in his final judgment approving the first UK DPA in 2015 with Standard Bank, highlighted that the judicial review of DPAs is a “critical feature of the scheme” for transparency, impartiality and public reassurance. This allows the proposed agreement to be scrutinised in detail and ensure it meets the required strict statutory conditions. Whilst both systems require some judicial intervention, the French regime is less reliant on it than the UK model. At least from what we have seen in the current HSBC settlement, the French judiciary does not become involved during the pre-negotiations stage and has minimal involvement in the adoption and monitoring phases of the CJIP. In fact their sole role appears to be merely to approve or dismiss a CJIP in the terms put forward by the PNF.
The main area where there seems to be the greater divergence between the French and the UK/US systems is when it comes to the requirement for cooperation. The concepts of cooperation and self-reporting, are unfamiliar to the French judicial and prosecutorial culture. Neither the French criminal procedures, nor the Loi Sapin II, contain guidelines related to cooperation or self-disclosure akin to those described in the US/UK DPS legislations/codes of conduct which emphasise the importance of cooperation and self-reporting in order to obtain a discount or a declination to prosecute. In the Rolls-Royce case in the UK, the SFO was able to overlook the lack of self-reporting due to the company’s extremely cooperative approach during the investigation.
Having said that, the HSBC CJIP is the first time that lack of voluntary disclosure and minimal cooperation in the context of a French criminal proceeding has attracted negative inferences. The CJIP highlighted that “minimal cooperation in the investigation” was offered based on (1) the lack of voluntary disclosure of facts, and (2) lack of acknowledgment by the Bank of its criminal liability during the investigation. The CJIP further highlights the PFN’s willingness to sanction companies with higher fines absent voluntary self-reporting and full cooperation, indicating a possibly seismic shift in how the French approach the concept of self-reporting.
Is Change on the Horizon?
The HSBC CJIP may turn to be an exceptional case given that there was no established legal framework in place when the investigation started, so a comparison at this stage might provide false results. We will have to wait and see what shape the CJIP take with further cases before a substantial comparison can be drawn – possibly a Franco-Anglo-American Airbus Investigation?
 US DPAs require criminal charges to be filed, which make DPAs court orders and may be, at least in theory, subject to judicial scrutiny. However, in practice, it has been accepted by the judiciary that they are not involved in the DPA process.